An industry whose ownership has been taken over by the state. Motives for nationalization may vary: in some cases industries are nationalized because they are natural monopolies, such as public utilities, so that public ownership is expected to enhance economic efficiency by moderating the exercise of monopoly power. Some industries are nationalized because large subsidies are needed to avoid run-downs in output and employment. In other cases the aim is to reduce the power of private capitalists, and take public control of ‘the commanding heights of the economy’. Potential drawbacks of nationalization are the absence of a hard budget constraint leading to overmanning and inefficiency, monopoly power limiting the need to respond to consumer needs, and government interference with management decisions concerning pricing and investment. In many countries formerly nationalized industries have now been privatized, that is, sold off to private owners. See also privatization.